Will Pharmacy Services Segment Push Growth For CVS In Q1 2019?

by Trefis Team
CVS Health
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CVS Health (NYSE:CVS) is set to announce its Q1 2019 results on May 1, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $60.5 billion in Q1 2019, which would be an increase of 32.3% on a year-on-year basis. The increase is mainly expected from the Pharmacy Services revenue segment due to higher expected number of mail order and pharmacy network claims. Market expectation is for the company to report earnings of $1.50 per share in Q1 2019, higher than $1.48 per share in the year-ago period.


We have summarized our key expectations from the earnings announcement in our interactive dashboard –What Has Driven CVS Health’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019?  In addition, here is more Consumer Staples data.


Key Factors Affecting Earnings:

Revenue to Grow:

  • CVS Health has seen continuous improvement in revenue in all quarters of 2018 compared to the same quarters in 2017. The revenue has increased from $44.5 billion in Q1 2017 to $54.4 billion in Q4 2018.
  • Revenue from the Prescription Drug segment is expected to be nearly $53.6 billion in 2019. The growth is on the basis of an expected rise in the number of retail prescriptions and average revenue per prescription in the US.
  • Revenue from OTC Drugs & General Merchandise segment is expected to continue growing and generate nearly $13.1 billion in 2019. The growth will be primarily pushed by the increasing number of CVS drugstores in the US.
  • Revenue from Pharmacy services segment is the highest contributor to the Total Revenue of the company and is expected to continue to be so. Trefis estimates the segment to generate $132.9 billion in 2019. The growth is expected to be pushed by a higher number of mail order and pharmacy network claims.


Trend in Expenses:

  • Total Expenses have been stable for most of the quarters except Q2 and Q4 2018. These fluctuations are because of goodwill impairment expense of $3.9 billion and $2.2 billion in Q2 and Q4 2018, respectively, We expect no high goodwill impairment cost in Q1 2019.
  • Cost of Revenue to Total Revenue has been around 85% for 7 quarters before falling to 82.2% in Q4 2018. We expect this to remain flat in Q1 2019.


Full Year Outlook:

  • For the full year, we expect gross revenue to increase by 7.4% to $199.6 billion in 2019. Increase in revenue is mostly expected from the Pharmacy Services revenue segment due to a higher expected number of mail order and pharmacy network claims.
  • EBITDA margin is expected to increase steadily and reach around 8.4%.


Trefis has a price estimate of $62 per share for CVS Health’s stock. The value is based on the expectation that the company will continue to grow its revenue and improve EBITDA margins.



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